Wednesday, March 07, 2007

Reading the document, it appears that medical practices with two or more doctors will be subject to the tax and that the food and pharmaceuticals exemption only applies to Illinois Residents.

Starting around page 31 of the PDF there is some details about the Gross receipts tax

The gross receipts tax meets each of these principlesof tax fairness. The gross receipts tax would applyonly to businesses that have revenues in Illinois over$1 million per year, and will be assessed at only twolow rates:• A 0.5 percent rate for all agriculture, mining,manufacturing, construction, wholesale and retailactivities; and• A 1.8 percent rate for all services activities.Manufacturing, wholesale and retail industries will beassessed at a lower rate to offset the impact ofmultiple levels of taxation on the production offinished goods. Taxation of services will be assessedat a higher rate to take into account the currentnarrower base of taxation of the service industry.

Then there is this little nugget which I think is huge

Essential products and services - Given the historic policy of maintaining access to food and pharmaceuticals, the retail sale of food and pharmaceuticals to Illinois residents will not be subject to gross receipts tax. In addition, state Medicaid payments to practitioners will also be exempt from the gross receipts tax, providing an incentive for doctors and dentists to enrollMedicaid-eligible patients.

-- So we are going to start taxing health care delivery if the provider is part of a practice that generates more than $1,000,000 in revenue. So any decent size practice with even two doctors or providers will likely be subject to the tax at 1.8%. Also the 'exemption' is just for medicaid, not for KidsFirst, the two new plans or medicare. So we are going to tax providers, who really have no option to pass the cost along to their customers because their rates are in large part dictated by insurance reimbursement. So if you see a doctor who is part of a practice with two doctors odds are the state is now going to tax them, tax them with a tax that can not be passed along to you.

Also arguing that the Medicaid exemption is a incentive to enroll Medicaid-eligible patients does not take into account that the state is so slow to pay these claims now, that 1.9% would not even cover the cost of money for the time it takes the state to pay.

Also it says ' pharmaceuticals' not medical devices, so glasses (taxed), wheelchairs (taxed), insulin pumps (taxed), replacement hips (taxed) if I understand this correctly, a big if I grant you.

Finally the language (emphasis mine)"Given the historic policy of maintaining access to food and pharmaceuticals, the retail sale of food and pharmaceuticals to Illinois residents will not be subject to gross receipts tax."

So if you sell someone food or pharmaceuticals you have to ask them if they are a resident? That's the way I read it, if a drug store in Calumet City fills a prescription for someone from Indiana it is subject to the tax. Same thing if someone buys a burger in downtown Chicago, oh you are from out of state, I have to pay tax on that. That would be a management nightmare.